Question

Break-Even Sales and Cost-Volume-Profit Chart

For the coming year, Cleves Company anticipates a unit selling price of $94, a unit variable cost of $47, and fixed costs of $559,300.

Required:

A. Compute the anticipated break-even sales (units).
________________units

B. Compute the sales (units) required to realize a target profit of $291,400.
________________units

C. Construct a cost-volume-profit chart, assuming maximum sales of 23,800 units within the relevant range. From your chart, indicate whether each of the following sales levels would produce a profit, a loss, or break-even.

$1,569,800
$1,400,600
$1,118,600
$836,600
$667,400

D. Determine the probable income (loss) from operations if sales total 19,000 units. If required, use the minus sign to indicate a loss.
$ ________ Income/Loss?

Answer 1

a) Break even unit = Fixed cost/Contribution margin per unit = 559300/(94-47) = 11900 Units

b) Required sales = (559300+291400)/47 = 18100 Units

C. Construct a cost-volume-profit chart, assuming maximum sales of 23,800 units within the relevant range. From your chart, indicate whether each of the following sales levels would produce a profit, a loss, or break-even.

$1,569,800	Profit
$1,400,600	Profit
$1,118,600	Break even
$836,600	Loss
667400	Loss

d) Net income = 19000*47-559300 = 333700